Dems on Tax Cuts: "Could Have, Would Have, Should Have"

A What-If on the Bush Tax Cuts

Excerpt:

In retrospect, an extension of the high-end Bush tax cuts seems to have become inevitable shortly after Labor Day.

When Congress returned from its August recess, some Democrats and White House officials were pushing for a vote on the tax cuts. But other Democrats didn’t like the idea. They thought a vote in the heat of the midterm campaign would hurt Democrats running in tough races.

So Obama administration officials and Congressional leaders delayed the issue until after the election. The Republicans then won the election, and Democrats were left with a choice between all the tax cuts or none of the tax cuts. Republicans, who did not hold the White House, could more credibly threaten to let all the tax cuts expire, even if a weak economy became weaker.

What could the Democrats have done differently?

For starters, they could have begun working on the issue well before September. As Ezra Klein has written, “it’s worth remembering that Democrats have known about the expiration of these cuts for 10 years now. If they wanted to create their own middle-class tax cut to replace Bush’s expiring program and make sure they got the credit from the voters, they could’ve done that.”

Comment: Upcoming scenarios (2012):

1. Mr. Obama and his Republican opponent in 2012 both campaign on the issue, but nothing happens before the election. One party wins a resounding enough victory that it gets its way after the election.
   
2. Nothing happens before the 2012 election. Mr. Obama wins re-election, but Republicans retain the House and maybe even take the Senate. The two parties then engage in the showdown many liberals wanted this time around, in which Mr. Obama refuses to sign any extension that includes the high-end tax cuts. Everyone’s taxes rise in 2013. They remain higher — helping reduce the deficit — or one party eventually stands down.
   
3. Congress and the White House manage to agree on an overhaul of the whole tax code before 2013, as various deficit panels have urged. Rates fall for all taxpayers, while various deductions are eliminated. The Bush tax cuts become an anachronism.
   

I’m guessing that Option 3 is the least likely.

Final comments: The Dems lost the opportunity to control the agenda. Had they acted in September - October, it could have tipped the election their way with less losses in the House! Another Pelosi failure!